Okay, it’s time for couples to hear the truth in regards to funding a home based business. Funding is an important topic but the truth is if you are a couple in business or a couple just starting a business, it is tough to get funding from anyone. This is because couple entrepreneurs are a very high risk investment.
For a couple who want to start a business, it matters very little how good their credit score is, funding is still difficult. The reason is because the success rate of couple-run businesses is low.
Some 98% of couple-run businesses fail within the first 3 years and because most couples don’t know how to protect themselves they lose everything. Then the couple usually ends up in divorce court. The lender most likely will not get paid back, as the business usually has gone bankrupt.
This makes lending to couple entrepreneurs who are starting a business, high risk and many investors steer clear of investing in high risk ventures with a 98% failure rate.
Thus if you want funding to begin a home based business, you are going to have to get creative. Of course there is crowd funding, but more importantly it is important to understand, that according to the SBA most home based businesses don’t need more than a few thousand dollars to start.
In fact, the average home based business can startup for as little as $500.00. That means most couples need startup capital between $500 and $10,000.00 max.
Another truth is that most banks are not interested in loaning such a small amount of money to start a business. So, the $500 to $10,000.00 is not enough to entice a lender. It doesn’t make sense for them to lend that small of an amount they don’t make enough interest income.
Most couples end up using a credit card to start a home based business but I think going into debt to start your business is like taking one step forward and two steps back. If you are thinking about starting a home based business with your spouse, here are 3 tips for funding your business.
Have a limit: Give your business some startup capital from your savings but don’t keep feeding it. Have a limit to how much you are willing to lend your home based business startup. Remember it is a loan so you must also have a way to make monthly payments back into your savings account.
Really look at your startup costs: and slash anything from the list that you are not really going to need. Do you really need that new computer or do you just want a new computer? Don’t add unnecessary expenses to your startup. This is the time to be lean and driven.
Don’t keep feeding the business if it is not making money: This is hard to do when you are emotionally invested in the business but don’t keep feeding an unprofitable business. Find the hole in the business and either fix it or create another more profitable business. So, if the agreement between you and your spouse is that the new home based business has a credit line of $10,000.00 from your savings account, then don’t lend it anymore.
The real truth about funding a business is that most couples are on their own. You must plan carefully and be lean when starting a business. Most home based businesses need more sweat equity than capital investment and this is often the secret for couples who achieve success together.